First of Their Kind Injunctions Obtained by Justice Department
The U.S. District Court for the Eastern District of New York has entered orders in two separate civil actions, barring eight individuals and entities from continuing to facilitate the transmission of massive volumes of fraudulent robocalls to consumers in the United States, the Department of Justice announced on Friday.
In one of the matters, United States v. Nicholas Palumbo, et al., the District Court entered a preliminary injunction that bars two individuals and two entities from operating as intermediate voice-over-internet-protocol (VoIP) carriers during the pendency of the civil action. In the other matter, United States v. John Kahen, et al., the District Court entered consent decrees that permanently bar an individual and three entities from operating as intermediate VoIP carriers conveying any telephone calls into the U.S. telephone system.
“These massive robocall fraud schemes target telephones of residents across our country, many of whom are elderly or are otherwise potentially vulnerable to such schemes,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The department is committed to stopping this unlawful conduct and pursuing those who knowingly facilitate these schemes for their own financial gain.”
“This office will take all appropriate measures to stop fraudulent robocalling schemes responsible for causing catastrophic losses to victims, including seeking to permanently shut down the U.S.-based enablers of such schemes,” said United States Attorney Richad P. Donoghue for the Eastern District of New York. “Protecting elderly and vulnerable individuals from being conned by foreign call center scammers remains a priority of this office and the Department of Justice.”
As alleged in the complaints, the defendants in both cases operated as VoIP carriers, receiving internet-based calls from other entities, often located abroad, and transmitting those calls first to other carriers within the United States and, ultimately, to the phones of individuals.
Numerous foreign-based call centers are alleged to have used the defendants’ VoIP carrier services to pass fraudulent government- and business-imposter robocalls to victims in the United States. The defendants also sold U.S. phone numbers to foreign entities, which were used as victim call-back numbers as part of massive robocalling fraud schemes.
As also alleged, the defendants were warned numerous times that they were carrying fraudulent robocalls — including calls impersonating government agencies, such as the Social Security Administration, the IRS, and legitimate businesses, such as Microsoft — and yet continued to carry those calls and facilitate fraud schemes targeting individuals in the United States.
Many of the robocalls were made by foreign fraudsters impersonating government investigators and conveying alarming messages, such as: the recipient’s social security number or other personal information has been compromised or otherwise connected to criminal activity; the recipient faces imminent arrest; the recipient’s assets are being frozen; the recipient’s bank and credit accounts have suspect activity; the recipient’s benefits are being stopped; the recipient faces imminent deportation; or combinations of these threats.
Each of these claims was a lie, designed to scare the call recipient into paying large sums of money. These calls led to massive financial losses to elderly and other vulnerable victims throughout the United States.
“The court’s decision sends a clear message to gateway carriers who knowingly do business with scammers targeting Americans from overseas,” said Gail S. Ennis, Inspector General for the Social Security Administration. “We will continue to pursue those who facilitate these scam calls by allowing them into the U.S. telephone network. I want to thank the Department of Justice for its support throughout this investigation and its commitment to protecting Americans from this insidious form of fraud and theft.”
United States v. Nicholas Palumbo, et al.
In the first case, the District Court issued a preliminary injunction against spouses Nicholas and Natasha Palumbo of Scottsdale, Arizona, and the Arizona companies they own and operate, Ecommerce National LLC d/b/a TollFreeDeals.com and SIP Retail d/b/a sipretail.com. The District Court held, in a written opinion, that the evidence presented by the United States demonstrated probable cause to conclude that the defendants were engaged in “widespread patterns of telecommunications fraud, intended to deprive call recipients in the Eastern District of New York and elsewhere of money and property.”
The preliminary injunction issued by the court bars those defendants from carrying any VoIP calls destined for phones in the United States and providing any U.S. telephone numbers (often used as call-back numbers in the fraudulent robocalling schemes) to any individuals or entities during the pendency of this litigation.
The court noted that though defendants had been warned more than 100 times of specific instances of fraudulent calls being transmitted through their network, they never severed their business relationship with any entity they learned was associated with fraudulent call traffic, prior to the United States’ filing of its lawsuit.
The court further noted that “the telecommunications ‘intermediary’ industry is set up perfectly to allow fraudulent operators to rotate telephone numbers endlessly and blame other parties for the fraudulent call traffic they carry,” that the United States “demonstrat[ed] probable cause to conclude that defendants’ business is permeated with fraud,” that “multiple individual victims in the United States suffered significant fraud losses,” and that “[e]very day that the defendants’ actions in this vein continue, the public is at risk of harm in the form of additional high-dollar fraud losses.”
The claims in the United States v. Nicholas Palumbo, et al. matter are allegations only, and there has not been any final determination of liability or wrongdoing.
United States v. John Kahen, et al.
In the second case, the District Court entered consent decrees permanently resolving the matter against five individuals and entities who were also operating intermediary VoIP carriers. The court entered a consent decree on March 2, 2020 against Jon Kahen, a/k/a Jon Kaen of New York, and New York corporations Global Voicecom Inc. and Global Telecommunication Services Inc., permanently barring those defendants from, among other things, using the U.S. telephone system to: deliver prerecorded messages through automatic means, carry calls to the United States from foreign locations, and provide calling and toll-free services for calls originating in the United States.
In addition, the defendants are permanently barred from serving as employees, agents, or consultants to any person or entity engaged in these activities. In a second consent decree, entered on March 24, 2020, the District Court barred KAT Telecom Inc., a New York corporation, from conveying or causing any other person or entity from conveying fraudulent telephone calls, fraudulent recordings, and unauthorized “spoofed” telephone calls. In the event that KAT Telecom, Inc. resumes operations, it must also implement strong anti-fraud measures, including anti-fraud monitoring, mitigation, and know-your-customer measures.
The claims resolved by the settlement in the United States v. Jon Kahen, et al. matter are allegations only, and there has not been any final determination of liability or wrongdoing.
These cases are being handled by Trial Attorneys Ann F. Entwistle and Charles B. Dunn of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Bonni Perlin, Dara Olds, and Evan Lestelle of the U.S. Attorney’s Office for the Eastern District of New York, in coordination with the Social Security Administration Office of the Inspector General and the U.S. Postal Inspection Service. Investigative support was also provided by the U.S. Treasury Inspector General for Tax Administration, U.S. Immigration and Customs Enforcement’s Homeland Security Investigation’s El Dorado Task Force and U.S. Secret Service.
The Federal Trade Commission and the Federal Communications Commission also provided pertinent data.
Justice.gov (March 2020) District Court Orders Injunctions against Two Telecom Carriers Who Facilitated Hundreds of Millions of Fraudulent Robocalls to Consumers in the United States